New hires join mid-month and employers report departures late. Set two rules in the contract: how partial months are billed, and how far back changes can go. Then apply both the same way every time, as clear lines on the next invoice.
Rule 1: partial months
Pick one:
- Whole months only. A member who starts on or before the 15th is billed for the month. After the 15th, billing starts next month.
- Daily proration. Bill the share of the month they were enrolled.
Whole months are simpler and cause fewer questions. In a made-up example under the 15th rule, an employee starts March 10. You bill all of March. Another starts March 20. Billing starts April 1.
Rule 2: the retro window
A retro window sets how far back the employer can report a change and get a credit or a charge. Outside the window, the past invoices stand.
In the same example, an employer tells you in May that an employee left in January. With a 60-day window, you credit the months inside it, March through May. February falls outside it and stays as billed.
Back charges work the same way
If the employer forgot to add someone who's been visiting since February, bill the missed months within the window. Say so on the invoice.
Show each change on its own line
- "Credit: member ended Feb 28, March billed in error: minus $70."
- "Back charge: member added Feb 1, February not billed: $70."
One combined adjustment line leads to questions. Here's the full invoice layout.
In your books
Credits and back charges should be recorded as adjustments to employer revenue, dated when they're issued, with a note on which month they relate to. If your books are on accrual, ask your bookkeeper and CPA how large retro changes should be handled. This post covers cash and accrual.
What I'd do this week
- Check each contract for a partial-month rule and a retro window.
- Add both to your contract template if missing.
- Total last year's credits by employer to see where changes come late.
Common questions
Is 60 days the right window?
It's one option. Shorter windows push employers to send changes on time. Pick one and use it for everyone.
What if an employer wants a credit outside the window?
Follow the contract. You can make an exception for a good client, but write it down as an exception.
Should credits be refunds or applied to the next invoice?
Applying them to the next invoice is simpler. Refund only when the contract ends or the employer asks.
Want credits and back charges tracked by employer?
We reconcile every account every month and send your P&L and Balance Sheet by the 15th, so decisions like this start from real numbers. If that's what you need, apply to work with us.